U.S. top court considers the 'patent troll' problem

WASHINGTON Feb 26 A dispute between two fitness
equipment makers landed at the U.S. Supreme Court on Wednesday,
giving justices a chance to consider how to deal with so-called
patent trolls, companies that acquire patents to sue for
infringement or extract licensing fees.

It and a second related case come to the court after
Congress, the White House and the Federal Trade Commission
attempted to address the issue for more than a decade.

Wednesday's cases focused on how to determine when a losing
company in a patent case should pay the winner's legal fees
because the case was frivolous.

The first case began when ICON Health & Fitness Inc sued a
rival, Octane Fitness LLC, accusing Octane of infringing one of
its patents on elliptical trainers.

Octane won, and asked to be reimbursed for the estimated
$1.3 million it spent fighting the lawsuit. Both the U.S.
district court and an appeals court that specializes in patents
declined to award the fees.

Rudolph Telscher, a lawyer for Octane, argued that fees
should be awarded because the company's case is "exceptional."
The U.S. Patent Act, which dates to 1952, says that the court
may award legal fees to the winning side "in exceptional cases."

That argument seemed to concern Justice Samuel Alito, who
said that district court judges typically hear few patent cases.

"Let's say that I'm a district judge someplace and I rarely
get a patent case," he said. "How am I supposed to determine
whether the case is exceptional? Exceptional compared to what? I
have very little basis for comparison."

As Telscher and the justices wrangled over whether fees
should be given in "meritless cases," "exceptional cases," or
because of "baselessness" or "bad faith," Justice Stephen Breyer
homed in on the key issue.

Breyer cited a much-criticized tactic in which patent trolls
send letters to companies or individuals accusing them of
infringement while proposing a deal: an offer to license their
patent for a fraction of the potential cost of a legal fight.

"All they (PAEs) did was say, 'We don't want to go to court
and cost you $2 million. Please sent us a check for $1,000, and
we'll license it for you. They do that to 40,000 people, and
when someone challenges it and goes to court, it costs them
about $2 million," he said, asking why that hypothetical case
wouldn't be appropriate for fee shifting.

Attorney Carter Phillips, who argued for ICON, responded
that the incident described by Breyer was "a very small slice of
the problem of litigation."

"It may be a small slice of litigation, but it is a slice
that costs a lot of people a lot of money," responded Breyer.

Phillips pressed on: "You know, the case you have in front
of you, though, is not a case like that." Unlike patent trolls,
ICON actually makes products, he said.

Major technology firms such as Google Inc and Apple
Inc have long complained about PAEs, saying the
litigation stifles innovation and costs billions of dollars in
legal fees.

Patent litigation costs have grown from $7 billion in 2005
to $29 billion in 2011, when 8,842 lawsuits were initiated by
PAEs against 2,150 companies, an official at tech company EMC
Corp told a congressional panel in October.

Congress is considering legislation that would use
attorney's fees to fight frivolous litigation.

In December, the U.S. House of Representatives approved a
bill encouraging judges hearing patent cases to award fees to
the winner of an infringement lawsuit, among other steps. A
similar bill has been proposed in the Senate.

Wednesday's second case was also narrowly focused on the
issue of legal fees.

In Highmark Inc and Allcare Health Management System Inc,
health insurer Highmark was initially awarded attorney fees by
the district court, but the court later tossed them out.

Highmark asked the court for the fees to be paid, citing
statements by the district court that "Allcare had not done its
homework when it began trolling for dollars and threatening
litigation."

The court also said that Allcare continued to pursue
"meritless allegations after the lack of merit became apparent."

Allcare disagreed.

In both cases, attorneys for the U.S. government urged the
court to relax the standard for awarding attorney's fees to the
prevailing side if the company alleging infringement did so
frivolously.
(Reporting by Diane Bartz; Editing by Ros Krasny and Douglas
Royalty)

DAKAR, Dec 9 Algerian authorities have deported
hundreds of West African migrants to Niger this week, trucking
them thousands of miles across the desert in one of the biggest
roundups seen this year, according to officials and human rights
groups.

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